Power Lunch - Tough Road Ahead for Tesla? PayPal's Momentum & McDonald's E. Coli Outbreak 10/23/24

Episode Date: October 23, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch alongside Kelly Evans, who's actually across the studio. I'm Tyler Matheson. Stocks are lower across the board right now and falling even more. We have an accelerating decline for the major equity indexes. The Dow and S&P 500 down more than 1%. The DASDAG now down by more than 2%. Bring it over here so I can show you some of what's going on today as we await details from the Fed's Bejibug any moment now. We're continuing to watch yields as the 10-year has risen back up to

four and a quarter this afternoon. It almost feels like this rise and yield has been welcomed, welcomed, welcomed by stocks. And then suddenly today, perhaps stocks are a little bit like, wait, maybe we're not so sure about this. Gold is also pulling back, but it has been on an incredible run. A 32% year to date, it's also been rising along with the dollar. We don't usually see that pattern. Those who are in and are benefiting from the portfolio diversification, especially Tyler on a down day. A lot of people talking about this story, and that is that McDonald's is a big drag on the Dow. A fresh E. coli outbreak in 10 states has been linked to the quarter pounder. One person has died, dozens of others sickened.

McDonald's thinks the cause, thinks the cause may be slivered onions that were sourced from a single supplier. But we've been down this road before, and it does nothing good for a stock, at least certainly in the short run. The most famous episode here was probably Jack in the Box some 30 years ago. and then, of course, it was a Chipotle outbreak about a decade ago. The Chipotle one went on and on and on. So investors, if they think this could have multiple chapters, want to be first to sell the shares before this is a continued kind of slog. If it's not, though, if this is a one-time situation,

they can remedy it, rectify it and move on, and we've shrugged it off in a few days or a week, then others would call this a buying opportunity. Again, McDonald's down 5% on this news. Apple is also a big drag on the Dow today and on the NASDAQ. An influential Apple analyst is lowering his estimates for iPhone 16 orders. Now this comes as AT&T CEO John Stanky said customer upgrades, Tyler, are slightly slower than last year. And Apple shares have been a bellwether in the selloff today.

They're down about 3.3 percent now session lows in conjunction with the rest of the markets. The uptake on the uptake on the iPhone 16 has been slower than I think anticipated. There have been some order cutbacks. I think the decline in the uptake in percentage terms that was referenced by AT&T was really rather minimal. It was significant but minimal. It was 3%, or 3.4%, not 3.7% or something like that. And bear in mind, AT&T shares at a 52-week high earlier today. Apple shares were at an all-time high yesterday. Right.

So even with this kind of game we're playing of, are they a little bit better? Are they a little bit worse? These stocks are able to shrug this off and kind of show investors that they have other stories still and other levers to pull. All righty. One of the things we're going to follow today, of course, is the beige book? Is this the beige book or the notes? Indeed. It's the beige book.

I can't keep them straight, whether it's the Baysbooks or the minutes from the meeting, they excite me so much, I can't stand it. But we've got Steve Leesman standing by with those reports. Steve. Detected a little sarcasm on your voice there, Tyler, but we'll talk about that later. Economic activity, according to the latest Beigebook, the collection of economic anecdotes from around the 12 Federal Reserve districts was little changed. Interesting contrast with the data showing an accelerating economy. Only two districts reported modest growth, which is pretty interesting and a little bit on the downbeat side.

There was declining manufacturing in most districts. Consumer spending was reported to have been mixed with consumers shifting towards less expensive items in some districts. The housing market generally held up with a lot of uncertainty about mortgage rates. There were only minor disruptions from the dock workers strike, but more widespread in the southeast disruptions from hurricane damage, including to crops. other businesses. The contacts were more optimistic about the longer-term outlook than they appeared to have been in the September Bayesbook. Employment increased only slightly, again, a little bit contradicting the data, which recently showed stronger job growth. The district reported low worker turnover and limited layoffs, which is an important part of keeping the job market

relatively stable. On the inflation issue, selling prices increasing were only slight and increasing at a modest pace. Home prices did edge up and rents reported to be slightly steady or down slightly. That's important for the way that we calculate inflation in the CPI. Dissons reported increasing pricing sensitivity among consumers. There's that pushback we've been talking about. And the firm's profit margins compressed because of higher input prices and then not passing them along. So interesting developments here. We'll see if this tends to take some of the edge off the concern about an accelerating economy that has pushed down the Dow as well as pushing up interest rates since the Federal Reserve cut them back in September.

Go back to that point you made at the top of the report on manufacturing, that it seems to be slowing. Yes, a declining manufacturing in most districts. This is along the lines of some of the data we've seen, though. I must say some of the regional Federal Reserve manufacturing surveys have been a little bit robust. You know, Tyler, sometimes this page book, and it's a reason why I do think it's a very important report, it does lead the way, and maybe sometimes it's a little bit behind the data. If it's in front of the data here, then it's telling you that the strength we saw in the third quarter might be waning as the quarter comes to a close, which means that it's not going to continue into the fourth

quarter and the Fed has less to worry about. Same thing is true with what you singled out there, the manufacturing decline. If indeed things are waning and getting a little bit softer towards the end of the quarter, then again, that inflation concern and that growth concern that seems to be embedded both in the Dow and in the bond market, well, there's reason for that to ease, and we'll have to just check in when we get this October data beginning in November as to whether or not this Facebook is indeed leading the way. And by the way, in this time of uncertainty, when we're not 100% sure what's going on in this economy, I've seen Fed officials lean more on this.

anecdotal data about figuring out what to do than the hard data. I would almost argue, Steve, that that bad beige book, what was it, a month ago, six weeks ago, preceded that 50 basis points cut. But is this tone as bad as that one was? Well, Kelly, you don't have to argue that with me. I agree with you completely, I think, no, this is not as bad as it was. I fully expected, I want to tell you my expectation going into this. I thought this page book was going to reflect some of the better economic data

that we've seen. And I was surprised, I've been surprised that it has not done so. So I think it's important in that respect. It can do a good job when we don't know. And by the way, we also know the data is going to be distorted by the hurricanes, is going to be distorted by some of the seasonal things that are out there at this time of year. So again, I wouldn't say that the survey data or the anecdotal data is more important than the hard data, but I would put it on an equal footing at this time with the actual data that we're getting. All right, Steve, thank you so much. We appreciate that. And the analysis that I went with it. We appreciate it.

All right, the Dow is down 564 points. That's one in the third percent. Let's bring in Nancy Tangler now for her view on the recent market action. She is the CEO at Laffer Tangler Investments. Nancy, always great to see you. We thank you for rolling with what is a very busy day. There are lots of stocks in the news. Some of them unfavorably regarded, including McDonald's, Apple, I guess. Yes, you'd say Starbucks has been a weak child.

You've got developments at Boeing. You've got earnings coming out later today at Tesla. The market has been accelerating in its decline. Is this related to individual shares, or is this the beginning of something unwelcome? Well, thanks. Good to be with you, Tyler and Kelly. I think a couple of things. One is that we've in the face of expectations that the market would decline in September,

it actually rallied. Then the expectation was we'd see weakness in October. This is part and parcel of a bull market. You need to have corrections. You need to have consolidation. So when you get a flurry of bad news, and I would say the McDonald news is bad news. We got some weak chip numbers, although Texas Instruments is rallying. You got the Starbucks guidance pulled, although I think Brian Nichols did exactly the right thing. But it weighs on investors and it kind of accumulates. And so there's no reason to be a buyer in some of these names. I guess what my sense is that is that a lot of investors were waiting for some reason to sell. And today there is a constellation of reasons to sell.

And I'm not saying it's related to the election, but I'm not saying it's not either. Yeah. And I would call them traders rather than investors because those of us that invest use these volatile periods as opportunities. We say in our firm volatility is your friend of the long time. investor. But the election continues to weigh. I think it's the black cloud kind of hanging over. Many have argued that the rally has been a Republican favor. It has moved in the Republicans' favor. That's why the markets rallied. I don't think anybody knows that. So when you get an

opportunity to sell in this kind of an environment, that's what traders do at the margin. So I'm not concerned. I don't think it's the beginning of a bare market. Okay. Have we, Nancy, finally reached the point of freaking out about interest rates? I don't know. You know, our head of fixed income, Byron Anderson, has been calling for higher interest rates. It was very lonely for about three months. He's been right. I think they can go a little bit higher. I don't, you know, in the 90s, you had the 10 year at or above 5% for the entire decade. The Fed funds rate was at 5%. So good stock, I mean, robust stock performance and higher interest rates can't. coexist if you've got productivity and we've got productivity in space.

And the only problem I have with the 90s analogy is because of what's going on with the deficit where you say, okay, 6% of the 90s when we're practically running a surplus is one thing, but 4.5% on the 10 year when we have a $2 trillion deficit and $900 billion of that is interest payments means that we're going to have to keep making those interest payments and the deficit's going to keep getting worse. And I wonder if this math is what is, you know, sort of discomforting the market. exponentially worse, Kelly. You're absolutely right. We were also globalizing. But I think to your point, it only matters when the bond market cares. And I don't think rates are going up because people are worried about the deficit. I think they're seeing that the economy is stronger than expected. And that's better for stocks than it is for bonds on the long end. And we're likely to see the fed slow down. Remember, the market got way ahead of itself, as it often does the bond market after the 50 basis point cut. So I think there's just a confluence of leh, you know, kind of meh.

And that's what drives momentum in the near term. But I think it's an opportunity still, not forever, but still. I was at a kind of eclectic dinner last night, and one of the guests was a jeweler. And she was complaining about inflation. And I said, well, inflation's coming down. She said, not for gold. Gold is going up, up, up. And it is impacting what I have to charge for the pieces that I make.

talk to us a little bit about gold and why it is as hot as it is. Well, I do think that is a deficit and geopolitical kind of safe haven. And so will it continue at these levels, I mean, to appreciate at these levels? I don't think so. I think what you're going to see once we get through the election is people are going to once again focus on policy, corporate tax rates, earnings, and X any geopolitical crisis, I think, will continue along in this bull market.

You know, I'll just point out one thing. That jobs revision, the non-fond payrolls from March to March of $818,000 overstated jobs, that actually means that productivity was that much better than was recorded. And so I'm pretty optimistic about the U.S. economy. I do think inflation will probably rise some. And, you know, only on Wall Street do we say it's coming down when it's still going up, right? So the rate of change is coming down, but it is still rising. Indeed. And maybe even that rate of decline is excelled. But let me just ask you before you go. Tesla reports tonight, no, you've liked the stock for a long time. What are your highest conviction investments, you know, top three or five?

Oh, outside of Tesla, service now, of course. I think even if they disappoint or if they just meet expectations, you want to be in this stock. for the long term. We still like Carrier. They report on Thursday. And one of the names, the first time I've owned an electric utility in 35 years, we bought in the first half of this year, Next Terra Energy. I think that was a good report. So I think you want to be in the AI fringes and then in the picks and shovels that are really driving the infrastructure. And so those three names all play a role. Is this then an entry point for you for Tesla or is this, you know, I've got it so I stick with it? I think if it sells off, you let it settle because once it starts selling, this stock continues to decline. I was at Wii robot. It was kind of a bust, Kelly. I mean, it was long on wow and short on details.

If we don't get details today, the stock will go down further. Wow. You've been, you know, you've been constructive for some time. So I think coming from you in particular, that is something people should take note of. Nancy, really appreciate it today. Thank you. Good to have you here. Thanks so much. Nancy Tangler with Laffer Tengler. Still to come, we'll continue to track the markets and this sell-off and dive deeper into some of the specific stock stories you also need to know this hour. Like McDonald's Health scare, Starbucks suspending guidance, Boeing's massive loss and those Tesla results will get to all of it when Power Lunch returns. Welcome back to Power Lunch, everybody. McDonald's shares falling by more than 4%, more than 5% right now after an E. coli outbreak was linked to its quarter-pounders. The CDC says it led to 10 hospitalizations and one fatality.

There have been a total of 49 cases reported so far in 10 states. Gregory Frankfurt is lead restaurant analyst at Guggenheim Partners. He just downgraded McDonald's to neutral from buy this morning and cut his price target to 285 from 290. Kate Rogers is our restaurant correspondent. Why don't Kate, I begin with you, and you give us the background on this story involving McDonald's, what's going on, how was it discovered, how long has it been going on, etc. Yeah, sure, Tyler. So the company, and the CDC, rather, came out yesterday late afternoon with this warning that, as you said, there were 49 cases, one death, and this was spread across 10 states. Now, out of an abundance of cautions, McDonald's has essentially pulled the quarter pounder from restaurants in 12 states. The majority of them being in Mountain West States, Colorado, the first named state. It seems to be the majority of cases are isolated there. Company spokespeople kind of walking. media through some of the developments, including what they're focusing in on. Slivered onions seem to be the most likely source of contamination, which is good news,

only in that they come from a single supplier with several distribution centers. They're also not ruling out the idea that it could have come from the actual beef patties in the quarter-pounders, although that's less likely because they come from several suppliers across several states, meaning that there would have to be multiple layers of contamination there, which again seems like a less likely scenario. And as you can see, the stock down more than 5% on that news. How quickly? How quickly did they come to this knowledge? In other words, how long has this been going on? I'm fascinated. It seems like it was a very quick response. Yeah, very quick. They have found out within the last two weeks, I believe, and the first reported

case was in the late September. So this is new information to McDonald's. And as they learn more, from the CDC, immediately pulled that item from the menus out of an abundance of caution. But again, zeroing in on the slivered onions and not ruling out the potential that it could also be tied to beef patty, although less likely. Gregory, does your change in rating and Target today, or at least in Target, suggests that you think this is a very concerning issue or one where you just have to move to the sidelines until we know more? It's very difficult to know.

When we look back at different examples of e-cola and food safety issues in the restaurant space, there's a wide variety of scenarios. You look at Jack in the Box in 1993 where there were four fatalities and sales were down 20, 25 percent, the first quarter, were down 8 to 10 percent, the next three quarters, took several years to recover. Chipotle in 2015, sales were down 20 to 30 percent for a full year. But then you also have an example two years ago with Wendy's. where there was an E. coli outbreak, and it was relatively contained, and we didn't even see a material impact to sales. And look, there's a lot of differences between these scenarios,

but there's a wide variety of possibilities, and we think the uncertainty was not baked into a 25 times multiple for shares. And the timing, Gregory, of this comes as well. How would you describe sentiment around the name in general? Is this the one where it's pretty positive? And so it's an opportunity to take a breath, pretty negative, just kind of put it in context. Yeah, so what happened is in the first half of this year, U.S. same store sales had gone negative. The stock, which had historically traded at 23, 24 times earnings, had slowed to under 20 times earnings. Now with earnings not really being revised materially, the stock's up 24% in the last four months. And so the multiple had gone to 25 times, and there was a lot of enthusiasm.

And a lot of that's been the U.S. business improving over the last three or four months. So it was warranted, but we see it as a lot of optimism baked in just as you got into the kind of $3.15, $320 a share of stock price. That makes sense. All right. Well, let's leave it there, at least for McDonald's for the time. Yeah, we're going to move on to Starbucks now as shares their slide after the coffee chain pulled guidance for next year. After sales plunged for a third straight quarter, Kate, why don't you bring us up to date on what's going on? Obviously, we have a new CEO at Starbucks who is trying aggressive.

to tackle some of the sort of fundamental issues that that business is facing. Yeah, certainly. So this is a real change in tone, in my opinion, and having covered the company for years. With Brian Nicol as its new CEO, coming out with these preliminary results yesterday, missed across the board, global same store sales fell 7%. That was nearly double what they had anticipated. Also saw major drops in both the U.S. and China businesses at 6% and down 14% respectively there. And so I think Brian Nicol looking to get ahead of this new cycle, in releasing this and saying we need to fundamentally change what we're doing. What we've been doing has not been working. He had an open letter posted about two weeks ago, kind of laying out his priorities

in this new role, saying that they're really going to focus first on getting the U.S. business on track. That's something that former CEO Howard Schultz had been saying in several open letters that he's posted in recent months. So it seems that that's going to be a really key area of focus. I think we can expect more changes in marketing. Starbucks is bringing on new marketing team members. It's starting to air commercials. and also slimming down the menu, getting the menu right and getting the morning right, as he has said, as that's such a key demo for Starbucks. And they've been losing the occasional customers. So we kind of know what to expect next week, but it'll be interesting to hear more from him on that earnings call.

This stock has, Greg, been flat for most for the year so far. It's up in recent months. But flat for the year, what does nickel need to do first, second, and third to turn the business around? and how quickly do you think the stock can turn around and reflect that? I think the first thing he just did it. He separated poor results from his messaging that he's going to give next Wednesday. This disclosure allows him to do is focus the earnings call primarily on his goals of turning around the business and put this quarter in the rearview mirror.

And he very effectively did that. I think the first thing we're looking at is this is the period last year where sales slowed, at the end of October, they had a protest that came into the brand, and you are now likely going to see near-term sales start to inflect from very negative to maybe slightly negative. And that's going to be kind of the first step. And then I think what we're looking for is we're looking for the plan to actually improve sales. Kelly, I think you and I spoke maybe a month ago about the need to pull back on U.S. unit growth

and U.S. development, we will see if he does that. And if that's part of the plan, that's something we've been emphasizing. I'm also curious, Greg, how he speeds up the experience there, if that's part of one of his goals, just kind of get in, get out like you do at Chipotle, and then kind of in conjunction with that, make those who are trying to linger have a better time as well. Yeah, I think he's trying to address all that simplification is the name of the game. And a lot of that is sort of what Howard Schultz has been trying to emphasize in some of his letters as well, is getting back to the core coffee product and the coffee experience and driving,

operations and velocity in the store. He did a very good job at Chippole with marketing and operations. This is a bigger left. This is a different animal, but some of his strengths should play through. Kate, final thoughts on what needs to be done and how quickly it can get done at Starbucks and whether price cutting may be part of the recipe here. So I think they are moving away, as we've reported, from some of those discounts. And those discounts that they had been rolling out weighed on this upcoming quarter, right, that we're going to hear more about next week. So I think you'll see a walk back from that. More of a focus on Starbucks is a premium offering because that is at its core what the company is

and people have been for years willing to pay for that. And the only other thing I'd add to the list that Greg had just kind of laid out there is China. What happens with the China business? Because that has also been such a drag on sales. They're talking about more competition there and a consumer that's kind of pulling back. And there's talks about a potential spinoff, you know, a potential joint business. So what does Brian Nicol want to do with China and Starbucks China?

But I think very, very first and foremost, will be focusing on the U.S. business. And I'm going to, Greg, I'm going to ask you the final question, if I might. Kate used the phrase a premium product and it's going to be priced as a premium product. My argument would be, okay, you can have a premium product, but if you're not delivering a premium experience, people are going to get ticked off and not come back. And I think that's where, in many ways, they've fallen down. That's definitely one of the things we've been hearing. And I think what's also challenging in this environment as we look for which restaurant brands

are winning and which restaurant brands are maybe slowing a bit right now, if you are an aspirational purchase or if you're a little bit more of a premium purchase and that's your brand, your sales are under a lot more pressure than the restaurant industry. That is a team across the board for the restaurant's base. All right folks, have a double shot. Number one, number two, hold the onions. Thanks. Appreciate it.

Gregory Frankfurt and Kate Rogers. Still to come, the payment space has had its share of weakness, but this name could be making a comeback. Hitting a new 52-week high up 30% this year will reveal it in Market Navigator next. Welcome back to Power Lunge on a tough session for markets. After the six-week wind streak, it looks like rising bond yields are finally taking their toll, with a three-day losing stretch now on the Dow down almost 600 points, a 2% drop for the NASDAQ as well. Shares of PayPal hit a new 52-week high, though, as the stock has had a solid. year up more than 30% so far. Our next guest sees even more upside ahead. It's slated to report

quarterly results on Tuesday. Joining us is Tony Zhang, chief strategist at Options Play. Tony, it feels a little tough making bullish calls in a tape like this, but what do you like about PayPal? Yeah, absolutely does. PayPal's really been on a multi-year turnaround story here. If you look at the chart here, it's been bottoming for almost a year now below that $70 level. And we finally broke out above that level a couple of months ago. And since then, it's been on this huge tear. It's been outperforming the S&P 500. We're trading just around that $80 mark right now. But the upside target that I have here is well into the $100 level, especially if you look at valuations. Things still look quite cheap here for PayPal trading at only about 16, 17 times forward earnings.

So you could just buy the shares outright, or I'm guessing you have an options play. Yeah, that's exactly right. I think this is a long-term investment for investors. And the option strategy that I want to take here is to sell a cash secured put, which is the type of option strategy that is actually suitable for long-term investors. In my opinion, it's actually the most underutilized option strategy for long-term investors. By selling that November 77.5 put, collecting a little over $2.5 earlier today, you're going to be able to collect roughly 3% of the stock's value in less than one month's time before the November expiration to potentially acquire the shares if the stock is below 77.

by that November expiration. And if it stays above that $77.5 level by that November expiration, what you do is you keep the roughly $2.5.5 that you earn on this cash secured put. And you can roll that into selling a new cash secured put. But here, what you're doing is you're trying to collect some income here. You're collecting nearly 3% in just a little over three weeks time, which is a high amount of yield for a stock like PayPal. Now, problematic if the shares go down significantly as that chart shows, if it works,

you want to keep deploying it. But, you know, this could be a tricky couple of weeks. Is this a trade you feel comfortable going into now with earnings, with the election and everything coming up? Well, specifically around earnings, this is why you're able to collect this amount of yield. And the trade structure here allows me to effectively own the stock around 75. Like I said, you know, I showed you that technical breakout that was around that $70 level. I'm really comfortable owning between 70 and 75, and that's really what the strategy allows me to do.

Tony Zang, appreciate your time today. Thank you so much. Tyler, back to you. All right, Kel. Up next, another major stock story on our radar. Boeing posting a huge loss. Continuing its streak of weakness worsened by strikes. Aircraft failures, leadership challenges, the whole kit and caboodle, as they say. The stock down 40% this year, the company's CEO, sitting down with CNBC. We'll wrap the key headlines next and tell you the full story. Welcome back to Power Lunch. I'm Kate Rogers with your CNBC News Update. The U.C.C. News has learned Vice President Kamala Harris will deliver a closing argument speech next Tuesday on the National Mall in Washington, D.C. It will be a final case for her presidency one week before Americans go to the polls.

Meanwhile, former President Donald Trump is holding a large rally at Madison Square Garden in New York City on Sunday, kicking off an arena tour in the election's final push. Oscar-winning director, Roman Polanski, will no longer go on trial in Los Angeles in an alleged 1973 rape of an underage girl. The plaintiff's lawyer Gloria Alred said the two sides have settled. Her client was seeking unspecified damages, but the terms of the settlement were not immediately disclosed. And New York's Attorney General is investigating whether Capital One's proposed takeover of Discover violates the state's antitrust law. Core filing show New York AG Latisha James wants to subpoena Capital One in connection with the probe. She says a potential merger could have a significant impact on New Yorkers, particularly those with lower credit scores. Tyler, back over to you.

All right, Kate, thank you very much. Meantime, stocks sliding throughout the session in that slide had been accelerating. And now coming back a little bit off the lows of the day with the Dow Industrial is now down 475, a little more than 1%. NASDAQ had been down about 2.1%, I think I recall seeing, and now down about 1.9. Boeing, a drag on the Dow today after its results came out. Let's bring in Phil LeBow now. as Phil, you spoke with the CEO of Boeing in his first televised interview since he took the job. What did he tell you?

It's going to be a long turnaround. That's basically what he had to say when we had a chance to talk with Kelly Orpberg. And yes, the stock is under pressure today. Remember, these results for the third quarter, they were pre-announced more than a week ago, a more than $6 billion a loss. So there's no numbers within the numbers that were released that put the stock under further pressure, though there was some commentary during the conference call. We'll talk about that in just a little bit.

In terms of Kelly Orkberg and what he told us and his game plan for getting Boeing back on track, it's pretty straightforward, though not big on details at this point, stabilize operations, improve the corporate culture, and rebuild key programs. Here's Kelly talking with us this morning on Squawk on the Street. I've said there's no silver bullet. This isn't going to be fixed in one fell swoop. We've got a lot of issues here that we're dealing with. The first thing we've got to do is stabilize the business and obviously getting.

through the IAM strike is the first big step in doing that. But then we've also got to shore up our balance sheet so that we have a solid balance sheet to manage the realities of our business going forward. You heard Kelly Orpurg mentioned the IAM strike. They are voting today. 33,000 machinists mainly out in the Puget Sound area. They will vote. A majority are needed to approve the latest contract offer. Remember, just 4% approved the previous. offer back in September, but this is a far richer offer that is on the table right now. We'll get the results late tonight. And then with regard to the stock being under a little bit more pressure today, during the conference call with analysts, Boeing CFO said, look, the cash

burn, it's going to be there in the fourth quarter and the company is probably going to have negative free cash flow in 25. Put those two together and not a whole lot of reasons to buy this stock at this point, Tyler. This is going to be a long slog here for Boeing to turn things around. Step number one, they got to get a contract with their machinist and get production restarting. All right, Phil, thanks very much. Phil LeBoe reporting. And for more on the next steps for the stock, let's bring in Richard Safran, senior analyst at Seaport Research Partners. Richard, bring us up to speed.

How do you rate the shares right now? And what would be the most bullish thing the company could do to make you and investors excited again? Well, good afternoon. So I still rank Boeing a very enthusiastic buy right. now. I think that there were two catalysts that investors were waiting for. The equity raise, of course, and an end to the strike. Now, we haven't had an end to the strike, but of course, as you just mentioned a moment ago, we did have the charges taken already. Right now, I think the main thing that Boeing could do to answer you right now to get even more investors interested

is show some tangible results on the plan that you just discussed. Show how they're going to rebalance the culture there, get more definitive on how they're going to stabilize the business, come out specifically talk about how much equity they're going to raise, et cetera, and most importantly, have a couple of quarters under their belt where you see solid execution. How long are you going to have to wait for this stock? to turn around as you expect it to? Well, there's an old phrase in aerospace and defense that says

nothing in aerospace and defense moves quickly except the product. And in my view, right now to answer you, I think that what we're looking at is 2025 as a transition year. The latter part of 2025, so obviously we have to have an end to the strike, et cetera. And I think 2025 is a transition year where we get more clarity on the points I've just made, including some solid execution. So an answer to you, and I think where you were going here, I think once investors get far better visibility into what 2026 looks like, in addition to 2025, and I think that's going to happen in the latter part of 2025, I think that's about the time frame you're looking at here. Remember, it's always about expectations, and what you're looking for is better visibility.

Final question, if I buy your thesis that this is a strong buy and there's going to be a transition year and then maybe a year of clarity and comeback in 26, are you expecting that there will be better points of entry if I am inclined to go along with your thesis and say this is a stock I want to own? Or is this the point where I might buy it? I think this is the point where you might buy it. And the reason is, I think a great amount of bad news is already. in the stock. Now, the risk, of course, is that there's another execution issue. But if I know Kelly Orkberg, right, he's the 800-pound in Gorilla in the room. And I just think, you know, that's far less likely to happen than we've seen before. So I think that, you know, if you say, like, you know, the equity raise is in, we have an end to the strike, execution improves, et cetera. I think you have a good case for the bad news being in the stock.

All right. Richard, thank you so much. Richard Saffron. We appreciate it. Sure. Pleasure. Pleasure being on again. You bet. Now check out shares of Winnebago. On pace for their worst day in two years down almost 11%.

The motor homemaker missing Q4 earnings estimates by 61 cents per share. We'll highlight some more individual stocks making big moves still ahead. But first, a check on the bond market. Welcome back. The Dow's down 424 points. Believe it or not, that's about 100 points off the session lows. On what's been a tough tape here on a Wednesday, the NASDAQ down almost 2%. We're tracking some individual headlines as well with earnings season in full swing.

Coca-Cola, for instance, beat third-quarter estimates higher prices offset sluggish demand. Despite that, shares are moving lower today. AT&T going the other way and moving to a 52-week high after third-quarter earnings surpassed analyst estimates, and the company gained more wireless subscribers than expected. Those shares are up about 30% this year now. And we're also watching Service Now, expected to report Q3 results after the close. You just heard Nancy Tangler talk about how much she looked. loves the stock, and it's trading near all-time high. So with all of that said, let's get a check

on the bond market. Rick Santelli is tracking the action. It's the bugaboo today, Rick. Well, you know, sometimes markets give you clues. And with so many questioning why yields are moving up so aggressively, to look at stocks today, I would say that you can't necessarily only stick with the economy's doing better, labor market, not as weak as the Fed may have thought, I think it's more of an issue of debt and deficits because the equity markets certainly aren't liking higher rates, but there have been many times in the past where rates go up arm and arm with equities because rates are going up because companies are doing so well and stocks are going higher. Not the case today. We had a 20-year bond auction. And even though the

20-year is not the most liquid maturity on the yield curve, it's the highest yield on the yield curve and today's auction was lousy. It tailed everything about the auction was weak. And if you look at a two day of tens, a couple things should jump out at you. We're above yesterday's highs. A lot of the rise, recent rise was after that 20-year auction result came out. And if you think about all treasuries, everything twos through 30s has a higher yield at some point today than yesterday. And most maturities have been trading above yesterday's high yields. Most of the like short maturities leading the way today. Today is the fifth consecutive day. Ten-year yields have surpassed their previous days' highs, as you see on that chart starting on the 16th.

And finally, Canada lowered rates today, the fourth consecutive ease. Today was 50 basis points from four and a quarter to 375. And what did the market do? Same thing it's doing all around the world where central banks are lowering rates. Look at that 10 year since October 1st. It continues to move higher in yield. Today's closes a two-week high, and it underscores how currency markets, of course, are sending much stronger messages on the dollar index, considering that it's been July since we've seen some of these yields on long maturities. But it's the same comp for the dollar index.

Tyler, back to you. Rick, thank you very much, Rick Centelli. Well, Tesla shares edging lower ahead of earnings later today. It's down about 15% over the past month. The poorly received robotaxi event causing much of the decline there. There's the musk of it also worries growing as the controversial CEO dives deeper and deeper into politics. Bear in mind, the stock is still up nearly 50% over the past six months. We will dive into what's next for Tesla and we get right back.

All right, welcome back to Power Lunch, everybody. Tesla down just over 1% as the street awaits the EV-Makers' Q3 results. after the bell. Joining us now is Tom Narayan. He's a RBC Global Autos analyst. Tom, welcome. Good to see you. You know, Tesla has been the stock that lots of people would like to beat up on. Do you think it deserves it? Well, I mean, to some extent it does, right? You had a lot of hype going into the Robotaxi event by the company itself. And for most investors and analysts, it did under deliver. We was short on actual numbers. So from that standpoint, you know, we totally understand why the stock performed the way they did. But we have to remember, the company doesn't look at itself the way that

we all look at it, right? Very short-sighted, you know, how is a stock going to trade next month? They're looking at a very long-term horizon. And so I kind of understand why the stock's trading the way they do, but I don't know if the company necessarily cares about how it trades in your turn. Take us through. You said something very interesting there. One, take us through what you expect the numbers to show for this quarter and then go out. widen the lens and take us through that long game that Tesla is playing and whether you buy their thesis that they can come out on top. Yeah, this is exactly the debate I've been having with folks of the past few months or since the Robotaxie event, actually, this month. And that is,

everyone seems to be focusing on the automotive gross margin X credit. The consensus number is like a 14.5% number. I'm a little worried there. I'm at 13.5%. So they couldn't miss there. But what I think folks should focus on is the total gross profit margin, which includes regulatory credits, which were huge last quarter, and I think will be strong this quarter, and energy storage, something that keeps getting ignored, and it's a bigger and bigger business. Utility companies are spending a lot more money, a lot more energy because of data centers, et cetera, and you need energy storage to make renewables, affordable. So there's a lot of long-term things that folks seem to, they look at Tesla, how we all used to years ago as just a car company, and they look at this auto gross margin X credit.

But I think if folks look at the total gross profit, there's a better chance that they could beat, actually, today. So it all depends on what folks are really paying attention on. Are they kind of, you know, looking at it from a past lens as a car company, or are they going to give credit for these other businesses and regulatory credits, I think are important to look at because they're here, and they're here to stay, and they're going to be here next year as well. And what are you looking for in the numbers today very quickly? You think they're going to beat the estimate or what? I think on total gross profit, I think they will beat.

On automotive gross margin X credit, I think there's a chance they could miss. Right. But remember, this stock will also trade on commentary during the earnings call. One thing we didn't hear a lot about during Robotaxi day that people thought we may hear about is the affordable car next year, right? You're supposed to come out in H125. We didn't hear a thing. I would expect somebody at least to ask about it in the Q&A if we don't hear it in the prepared comments. Yeah.

And if that comes out, that'll definitely be positive. Tom, we got to leave it there. I'm looking for a model refresh on their line. I think they need that desperately as well. Anyhow, that's just my opinion. Thanks for watching Power Lunch, everybody. Everyone's been waiting. Get us a small car. Give us something. Closing bell starts right now.